June 12 (Bloomberg) -- An agency created to illuminate
bankrupt Detroit plans to borrow $185 million to improve street
lighting, according to a Standard & Poor’s analyst.

The Michigan Finance Authority will offer bonds, secured by
a utility users tax, on behalf of Detroit’s Public Lighting
Authority on June 25, analyst Jane Ridley said. The debt is
rated A-, the seventh-highest investment grade, according to an
S&P report.

The former U.S. auto-making capital’s $18 billion in debt
led to the largest U.S. municipal bankruptcy. Some bondholders
will receive 74 percent of $388 million they’re owed, under a
mediated agreement.

The lighting authority was created in February 2013 to
replace a city department, and was authorized to issue debt to
repair a system that left swaths of the city in darkness, with
an estimated 40 percent of its 88,000 lights broken.

A $60 million bond sale in December financed the
replacement of thousands of broken, outdated street lights with
LED lights. The authority had planned to use the new bond issue
to pay off the December debt and finance more lighting repairs.

The bond sale was approved by U.S. bankruptcy Judge Steven
Rhodes as part of the city’s restructuring plan to improve
services.

The lighting bonds are backed by $12.5 million collected
annually in a utility users tax levied by Detroit. The city
doesn’t get access to the revenue until monthly debt service
obligations are met, according to the S&P report. That priority
is “a key credit strength” that supports the investment grade,
Ridley said in the report.